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EE-RM/STD-98-440

FROM DOJ/ATR/TRANS, ENERGY& AGRI (THU) 4. 5'01 13:59/ST. 13:58/N0. 4260617223 P 2

DEPARTMENT OF JUSTICE

Antitrust Division

JOHN M. NANNES

¢^Sas^^~~8~~~ ~Acting Assistant Attorney General

Main Justice Building

950 Pennsylvania Avenue. N.W.

Washington, D.C. 20530-0001

(202) 514-2401 / (202) 616-2645 (f)

antitrust@justicc.usdoj.gov (ie

http://www.usdoj.gov (World Wide Web)

April 5,2001

Eric J. Fygi, Acting General Counsel

Department of Energy

Washington, D.C. 20585

Dear Acting General Counsel Fygi:

I am responding to your letter dated March 20, 2001, seeking the vicws of the

Attorney General about the potential effect on competition of the final rule published on

January 22, 2001, setting forth new energy efficiency standards for central air

conditioners and heat pumps. You specifically asked for our views about the impact on

competition of the rule's prescription of a 13 SEER (Seasonal Energy Efficiency Rating)

standard for all product classes, except for niche products, and the desirability of reducing

the standard to a 12 SEER level for all subcategories. Your Icttcr requcstcd our vicws by

March 30, but your staff agrecd to extend the response date to April 6.

As you noted in your letter to the Attorney General, the Antitrust Division had

earlier expressed its views on the proposed rule, which provided for a 12 SEER standard

for air conditioners and a 13 SEER standard for heat pumps. Thc Division had concluded

that the 13 SEER standard for heat pumps could have an adverse effect on competition

and urged the Department of Energy to adopt a 12 SEER standard for heat pumps. We

noted only minor concerns about the proposed 12 SEER standard for air conditioners.

We have reviewed the final rule and determined that the 13 SEER heat pump

standard still raises competitive problems. We have further dctcrmined that the 13 SEER

standard for air conditioners also raises competitive concerns.

In our earlier letter, we identified and described three competitivc problems

~~i~ EE-RM-STD-98-440 COMMENT 157 ,0 -.' '. _ .••.••..•. _ .•....••• --.....•.•..... ~ .• < ... '§~-: .. /~(!'./?l~i;~~~~~·~8~~ 10-:,. -. ~, FROM DO J/ATR;TRANS, ENERGYl AGRI (THU) 4. 5' 01 13: 59/Vr. 13: 58/NO. 4260617223 P 2 

• .. 

Eric J. Fygi, Acting General Counsel 

Department of Energy 

Washington, D.C. 20585 

Dear Acting General Counsel fygi: 

DEPARThfENT OF JUSTICE 

Antitrust Division 

JOHN M. NANNES 

Acting Assistan.l Anomey General 

Main Justice Buildin, 

950 Pennsylvania Avenue, N.W. 

Washington, D.C. 20530-0001 

(202) 514-24011 (202) 616-2645 (f) 

antitrust@justicc.usdoj.gov (ioa:nIc1) 

htIp:/lwww.usdoj.gov(World Wide Web) 

April S, 2001 

I am responding to your letter dated March 20,2001, seeking the "jews of the 

Attorney General about the potential effect on competition of the final rule published on 

January 22, 2001, setting forth new energy efficiency standards for central air 

conditioners and heat pumps. You specifically asked for our view~ ahout the impact on 

competition of the rule's prescription ora 13 SEER (Seasonal Energy Efficiency Rating) 

standard for all product classes, except for niche products, and the desirability of reducing 

the standard to a 12 SEER level for all subcategories. Your letter requested our vicws by 

March 30, but your staff agreed to extend the response date to April 6. 

As you noted in your h:lh:r La the AUOmey Gcmeral, th~ Antitrust Division had 

earlier expTcssed its views on the proposed role, which provided for a 12 SEER standard 

for air conditioners and a 13 SEER standard for heat pumps. The Division had concluded 

that the 13 SEER standard for heat pumps could have an adverse effeet on competition 

and urgcd the Department of Energy to adopt a 12 SEER standard for heat pumps. We 

noted only minor concerns about the proposed 12 SEER standard for air conditioners. 

We have reviewed the final rule and detennined that the 13 SEER beat pump 

standard still raises competitive problems. We have further dctcmlined that the 13 SEER 

standord for air conditioners also raises competitive concerns. 

In our earlier letter, \lI:e identified ~d described three competitive problems 
.*^. A. . -EE-RMISTD-98-4O I 15

FROM DOJ/ATR/TRANS, ENERGY& AGRI (THU) 4. 5'01 14:00/ST. 13:53/N0. 4260617223 F 3

resulting from the proposed 13 SEER standard for heat pumps, including a

disproportionate impact on smaller manufacturers' and an adverse effect on

manufacturers of specialized equipment (the niche product manufacturers) and

manufacturers of equipment for space-constrained installation sites (such as manufactured

housing, which accounts for a significant percentage of the country's housing starts). The

exception made in the final rule for niche product manufacturers may alleviate

competitive problems for their products, but the exception does not eliminate the

difficulties for manufacturers of standard equipment who could not make equipment that

complied with the 13 SEER standard and still fit into space-constrained sites. The final

rule also continues to have a disproportionate impact on smaller manufacturers of heat

pumps. The 13 SEER standard for air conditioners raises the same kinds of competitive

problems as the 13 SEER standard does for heat pumps.

We urge the Department of Energy to consider the impact on competition and to

adopt a 12 SEER standard for all products covered by the rule.

Sictely,

(/g ohn M. Nanncs

We noted in our previous letter that less than 20% of the total current heat pump

product lines meet the new standard, but for some small manufacturers, 100% of their product

lines failed to satisfy the standard. The same is true for air conditioner manufacturcrs whcn the

standard is 13 SEER.

EE-RM-STD-98-440 COMMENT 157 • ]e. _L. .. ~ 

... ,-". ~ - . 

., .. _.-... - -~- -- . -- -~ -: --1·l::'7'1 

EE-RM/STD-S8-440 ... ~ :/. I . FROM DOJ/ATR/TRANS, ENERGY&: AGRI (THU) 4. 5' 01 14:00/ST. 13: 53:'NO. 4261j617223 p 3 

• resulting from the proposed 13 SEER standard for heat pumps, including a 

disproportionate impact on smaller manufacturersl and an adverse effect on 

manufacturers ofspeciali7.ed equipment (the niche product manufacturers) and 

manufacturers of equipment for space-constrained installation sites (such as manufactured 

housing, which accounts for a significant percentage of the country's housing starts). The 

ex.ception made in the fmal rule for niche product manufacturers may alleviate 

competitive problems for theiT productsl but the exception does not eliminate the 

difficulties for manufacturers of standard equipment who could not make equlpment that 

complied with the 13 SEER standard and still fit into space-constrained sites. The ftnal 

rule also continues to have a disproportionate impact on smaller manufacturers of beat 

pumps. The 13 SEER standard for air conditioners raises the same kinds of competitive 

problems as the 13 SEER standard does for heat pumps. 

We urge the Department of Energy to consider the impact on competition and to 

adopt a 12 SEER standard for all products covered by the rule. 

I We noted in our previous letter that less than 20% of the lOlal current heat pump 

product lines meet the new standard, but for some small manUfacturers, 100% of their product 

lines failed to satisfy the standm·d. The same is true for air conditioner manufacturers when the 

standard is 13 SEER.